Q: The IRS has garnished my wages and seized money from my bank account. How do I get the IRS to stop?
A: The IRS is legally required to send written notification to a taxpayer before initiating a tax levy (i.e. seizure) of a taxpayer’s assets. Thereafter, the IRS has many tools to collect the taxes during the 10-year statute of limitations that begins after the assessment of tax from a tax return, substitute for return or audit examination. If the taxpayer cannot fully pay the tax debt, he or she can request a collection alternative along with a complete Form 433, Collection Information Statement. Form 433 contains a list of the taxpayer’s assets along with monthly income and expenses. The IRS will not consider collection alternatives if there are unfiled tax returns or if the current year’s estimated tax payments have not been made.
If the IRS determines that the taxpayer can fully pay the tax debt during the collection period, the IRS will approve an installment agreement to fully pay the taxes.
If it appears unlikely that the taxpayer will be able to fully pay the tax balance, the taxpayer could propose an Offer in Compromise to settle the tax debt for less than the full amount due. The IRS will review the Form 433 along with the supporting financial statements to determine the taxpayer’s reasonable collection potential. The IRS calculates the reasonable collection potential by adding the value of the taxpayer’s assets to the monthly net income multiplied by the remaining number of months the IRS has to collect the tax debt. If the reasonable collection potential is less than the total tax balance due, then the taxpayer is a good candidate for an Offer in Compromise which can be calculated two ways: